Turnpike Commission Triples Act 44 Debt from $14 Billion to $44 Billion

Unpaid debt increases from $0 to $73 billion under PTC’s revised plans
 

HARRISBURG, PA — Today, the Commonwealth Foundation presented an analysis of the proposed debt under the Pennsylvania Turnpike Commission’s proposal to the federal government to toll Interstate-80.

In June 2007, before Act 44 was passed, the Pennsylvania Turnpike Commission (PTC) presented financial spreadsheets indicating plans to borrow a total of approximately $14 billion for the “monetization” of the Turnpike and for capital expenditures on both the Turnpike and I-80 to fund mandatory payments to the Pennsylvania Department of Transportation.  Under the PTC’s initial 40-year proposal, all of the debt incurred by the Commission would be retired by the end of the so-called “public-public partnership”.

Recent revisions to the PTC’s plans to toll I-80 have dramatically increased the amount of debt to be paid off by toll payers.  Under the new proposal, the Turnpike Commission plans to borrow almost $44 billion—an increase of more than 300% in new bonded debt.  Pennsylvania taxpayers and toll payers will now be paying this debt long after the Turnpike Commission’s 50-year lease agreement to toll I-80 expires under Act 44.

The Pennsylvania Turnpike Commission has not publicly revealed the total debt payment of these bonds, so the Commonwealth Foundation calculated the unpaid debt after 2057 to be between $38 and $73 billion (even after paying $74 billion in principal and interest over the first 50 years).  The accompanying chart provides the assumptions and calculations included in the Commonwealth Foundation’s financial analysis.

“This massive new borrowing scheme only serves to perpetuate the Turnpike Commission and it’s self-interested patrons,” said Matthew Brouillette, president and CEO of the Commonwealth Foundation, “Mortgaging our future with the Pennsylvania Turnpike Commission is not in the best interests of Pennsylvania taxpayers and toll payers.  These new revisions demonstrate that the PTC is solely interested in perpetuating its own financial interests rather than those of the Commonwealth of Pennsylvania.”

A previous financial analysis conducted by the Commonwealth Foundation found that if the federal government rejects the request to toll I-80, the state will lose $37.4 billion over the next 50 years.  Similar losses will likely be incurred if the Turnpike Commission is given control of I-80, rather than competitively bidding the highway.

Based on these analyses, the Commonwealth Foundation reiterated its call on the Federal Highway Administration to reject the Turnpike Commission request to toll I- 80.  “Hopefully the Federal Highway Administration will save the Pennsylvania taxpayers from the Turnpike Commission’s schemes to perpetuate itself,” said Brouillette.

“Total payment” for bond issues for I-80 Capital Expenditures, I-80 Monetization (payments to PennDot), and Turnpike Monetization were calculated by the Commonwealth Foundation.  These estimates are based on total payments of  2.5 times bonds issued (low debt scenario) to 3.5 times bonds issued (high debt scenario). While total debt service of 3.5 times the amount borrowed is unusually high for debt service, it is consistent with payments of the Turnpike Commission for Capital Expenditure borrowing, and the series of bond issues for I-80 CapEx, I-80 Monetization, and Turnpike Monetization completely retired within the life of the deal.

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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

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